finance formulas
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11 Terms
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four profitability ratios
gross profit margin
mark up
net profit margin
return on capital employed
mark up
net profit margin
return on capital employed
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ratio: gross profit margin
gross profit/revenue x 100
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ratio: markup
gross profit/cost of sales x 100
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ratio net profit margin
net profit/ revenue x 100
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interfirm
between different firms, for example, comparing the performance of two different house builders
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intrafirm
within the firm, for example, comparing this year's results with last year's, or the performance of the Leicester branch of a retail store.
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Stakeholder
anyone with an interest in the activities of a business, whether directly or indirectly involved.
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return on capital employed ROCE
net profit before interest and tax/ capital employed x 100
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measuring liquidity
liquidity ratio measures how solvent a business is
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Types of liquidity ratio
current ratio
acid test ratio/ liquidity ratio (liquid cap)
acid test ratio/ liquidity ratio (liquid cap)
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current ratio
current assets/ current liabilities